When David Beats Goliath: The Five Billion Euros That The Vatican Owes Rome

Policy
I write about Italian politics and economy in the global framework.

People walking on Via della Concillazone next to St. Peter’s Basilica and St. Peter´s square at Vatican city.Getty

The Vatican owes Rome some 5 billion euros.

The Court of Justice of the European Union (CJEU) ordered Italy to recover the ICI property tax that the catholic Church never paid to the Italian government. The European judges have decided to rule out a 2012 decision of the European Commission and a 2016 judgment of the EU Court which allowed Rome to exempt the Vatican from paying taxes on its real estate. The previous verdicts stated “the impossibility of recovering the aid due to organizational difficulties”, but now the judges in Luxembourg have revised their position, asserting that it is a matter of mere “internal difficulties” in Italy and that there is no reasons for that money not to be paid.

The Italian Executive must reclaim an amount of roughly 5 billion euros, which corresponds to the arrears that the Church should have paid in between 2006 and 2011. The ICI have been in place from 1992 to 2012, when the Mario Monti administration determined to replace it with IMU, a tax that combines the one on real estate and the IRPEF, an income tax. For many years, the ICI was not applied to the Church’s properties, as part of the practice to exonerate places of worship from taxation. However many religious buildings on the Italian soil are rather meant for other kind of activities, like accommodation services and leisure. In 2012, Monti’s government decided that duty exemptions were to be applied only to worship places, but every other estate belonging to the Church with commercial aims must be subject to taxation.

However, these double standards were quite criticized, especially because it only took a chapel to define a building as worship place, even when the main activity was a completely different one, like a restaurant or a hostel. That is why the Montessori primary school, a private but secular institute in Rome, decided to file an appeal to the Court of Justice against the 2016 ruling, which affirmed that it would have been “objectively” impossible to calculate retroactively the amount to be paid and whether the activities were commercial or non-commercial, so to know when the taxes should have been applied. “It has been a long battle but, in the end, David has beaten Goliath”, the representatives of the school told Ansa, the Italian news agency, ironically using a religious metaphor to comment on the judgement. The Italian Radical Party, which had itself presented an appeal against tax exemption for the Church more than a decade ago, supported the school’s suit.

It is for sure a victory to all those secular institutions that have been fighting Church’s privileges for a long time, but like it often happens when it comes to the relationship between State and Church, the religious power gets only superficially affected. Yes, it will have to restore 5 years of taxes on real estate due to ICI, but the actual IMU distinction between economic and non-economic religious activities, which determines that just one category of properties is going to be taxed, is going to stay in place. Which means that the catholic Church can still count on many economic privileges on the Italian soil. Such privileges have a long history: the primacy of political influence in Italy was always contended by the secular and religious powers, in a tradition of disputes, intrigues and power games. The presence of the catholic seat and its most important institutions within the Italian borders, has always played a big role in the country’s politics and society and always had to be dealt with by the governments. In 1929 dictator Benito Mussolini signed a document with Pietro Gasparri, Cardinal Secretary of State, thinking that it would quell or at least resize the Church’s political power and influence on the Italian public opinion. Turned out it did quite the opposite.

By signing the Lateran Treaty, Mussolini granted the Church with its privileges that have a huge impact still today in many aspects of the sociopolitical sphere in Italy. The pact was made of two clauses, one that gave the Pope full independence and sovereignty over Vatican City, and the Concordate, which defined the relations between the two parts. The Italian government agreed to conform its own laws over marriage to the catholic ones, it assured the Vatican with tax breaks, it cancelled import tariffs, it exonerated religious men from military service and it acknowledged Catholicism as its one and only religion. The Treaty is still a part of the Italian Constitution (article VII) which was drafted right after the World War II, when Mussolini was executed by the partisans, and was brought into force in 1948. In 1984 the article was revised, and the clause for which Catholicism was the only religion of the State was removed. On the contrary, all the privileges that Mussolini allowed to the Church were reaffirmed, for which still nowadays Italy is one of the most religious countries in the EU, and its politics are heavily shaped by the influence of the Vatican on its soil. There are still a lot of catholic schools in the peninsula, state-financed pension funds for religious men and salaries for chaplains, fiscal exemptions and tax relief for billions of euros every year, a ridiculous amount of money paid by all Italian citizens. Citizens of a secular state.

In the end, the Church owns far more of Italy than a big square in Rome. Its holdings include hotels, restaurants, commercial initiatives, shipping ports, rental properties and much more, all of it discharged from properties duties. The Vatican’s businesses benefit from a great (but unfair) advantage when it comes to commercial competition, with counterparts that do pay their taxes. Moreover, two thirds of the “voluntary contribution” called 8xmille that taxpayers can either give to the State or to the 5 officially recognized religions, goes to the Vatican, entering almost a billion in its coffers every year.

Many Italian newspapers have documented how much it costs to every citizen to share the boot shaped country with the Pope. The little State inside Rome does look like a paradise, a fiscal paradise: no corporate income duties, no trade tariffs, no real estate taxes and a considerable amount of fiscal privileges. If all of it was suddenly taken away, the government would have all the economic resources needed to push through a reform or two, but history teaches otherwise. It advises that it is never good to bother the religious power, because its acknowledgement is very much needed. The Church has always played a huge role in Italian politics and to defy it has a big cost when it comes to elections still nowadays.

I am a philosophy graduate turned journalist specialized in international politics and global affairs.